Property sector depressed

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LISTED property firm Mashonaland Holdings Limited (MHL) says reduced capacity utilisation and declining disposable incomes have resulted in a fall in demand for real estate space and properties.

In a trading update for the first quarter ended December 31, 2019, MHL said occupancy levels marginally declined to 76,2 percent in 2019 from 77 percent.

“Occupancy levels decreased marginally at September 2019 due to some office sector tenants reducing space in December 2019.

“Reduced capacity utilisation of most companies, decline in real wages and purchasing power continue to put pressure on demand for real estate space and properties. Rent reviews are becoming sticky as the tenants’ rent paying capacity continues to be under threat,” the Group said.

This comes as occupancy levels for commercial and office space in most central business districts (CBD) throughout the country are significantly dropping, as the deteriorating economy continues to bite tenants.
The group added that the interest rates, ranging from 30 percent to 40 percent, lower than inflation negatively affected the debt and mortgages market.

“Relatively low interest rates together with lack of liquidity in the market has made it challenging to debt fund acquisitions and developments.”

Property expenses to revenue ratio for the quarter was 16 percent compared to 19 percent achieved during the same period last year.

“Administrative expenses to revenue ratio for the quarter ended December 31, 2019 was 35 percent compared with a 32 percent that was achieved in the previous period.

“Marginal increase in the ratio reflects the impact of staff cost of living cushioning allowances and increase in certain general administrative expenses at a rate that is higher than increase in revenue.”

In its outlook, the Group says in spite of government putting in place measures to manage inflation, rentals are still expected to grow at a much slower rate than inflation.

“Despite the development submarket getting more riskier, the company will carry on with some of its construction projects.

“The construction of the 25-cluster houses in Westgate is to commence in Q2 of 2020 and cost management measures, including pre-purchases of raw materials, will be put in place to ensure successful delivery of the project,” said MHL.

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